Tokenized silver futures briefly became the largest source of forced selling across crypto markets this week, overtaking bitcoin and ether during a sharp liquidation wave.

The crypto-native silver contracts proved more volatile than bitcoin as prices slid, leaving leveraged traders facing heavy losses. Hedge fund manager Michael Burry, best known for “The Big Short,” described the episode as a self-reinforcing loop in which falling prices triggered liquidations that pushed prices even lower.

In a note this week, Burry labeled the move a “collateral death spiral,” arguing that elevated leverage across crypto exchanges amplified the selloff. As the value of crypto collateral declined, traders were forced to sell tokenized metals positions to meet margin requirements, accelerating the unwind.

“Sky-high leverage on these crypto exchanges tied to rising metals prices meant that as the crypto collateral fell, the tokenized metals had to be sold,” Burry said. “This is a collateral death spiral.”

Burry said silver-related liquidations exceeded bitcoin liquidations on at least one venue during the unwind. “It was reported that tokenized silver futures liquidations actually exceeded Bitcoin liquidations on one crypto market called, ironically, Hyperliquid,” he added.

The move was driven less by bitcoin-specific factors and more by positioning in metals markets, where a rapid pullback collided with crowded leverage and thin liquidity. At the height of the selloff, tokenized silver futures logged one of the largest wipeouts across crypto markets, surpassing the usual leaders bitcoin and ether.

Tokenized metals products allow traders to take directional exposure to gold, silver, and copper via crypto-native platforms rather than traditional futures exchanges. These contracts trade around the clock and often require less upfront capital, making them appealing in volatile conditions. However, that structure can accelerate forced selling when prices move sharply against crowded trades.

As metals prices rolled over, leveraged long positions were forced to unwind. Liquidations surged as traders failed to meet margin calls or had positions automatically closed by platforms. On Hyperliquid, one of the most active venues for these instruments, silver-linked liquidations briefly eclipsed those tied to bitcoin—an unusual instance where a macro-linked contract drove market stress.

The episode also coincided with tighter risk controls in traditional markets. CME Group raised margin requirements for gold and silver futures, increasing collateral demands and pressuring leveraged traders to either add capital or reduce exposure. While those changes apply directly to CME contracts, market participants say shifts in positioning and risk appetite can quickly spill into tokenized markets tracking the same underlying assets.

The broader takeaway is that crypto platforms are increasingly being used as alternative rails for macro trades—not just crypto. In periods of stress, that evolution can flip liquidation dynamics in ways traders don’t always anticipate.